Friday, October 19th, 2012 | | |
At the LIFE Foundation, we strongly advocate for self-reliance in your personal financial planning, so you need to be aware of the pending tax increases for 2013. Next year will generate 20 new or higher taxes from the Affordable Health Care Plan that will become effective for the first time on Jan. 1, 2013. Here are five of the biggies:
Medical device tax – a $20 billion tax increase: Medical device manufacturers employ 409,000 people in 12,000 plants across the country.
“Special Needs Kids Tax” – a $13 billion tax increase: The 30-35 million Americans who use a flexible spending account (FSA) at work to pay for their family’s basic medical needs will face a new government cap of $2,500.
Surtax on investment income – a $123 billion tax increase: This is a new 3.8% surtax on investment income earned in households making at least $250,000 ($200,000 for a single person).
“Haircut” for medical itemized deductions – a $15.2 billion tax increase: Currently, those Americans facing high medical expenses are allowed a deduction to the extent that those expenses exceed 7.5% of adjusted gross income.
Medicare payroll tax hike – an $86.8 billion tax increase: The Medicare payroll tax is currently 2.9% on all wages and self-employment profits. Under this tax hike, wages and profits exceeding $200,000 ($250,000 in the case of married couples) will face a 3.8% rate instead.
The problem is, how do we pay for the new health care plan and reduce the national deficit at the same time? If the government could impose a 100% tax on all the earnings of every person in America earning at least $250,000 a year, how much money would it receive? The answer is $1.4 trillion.
Taking all of the profits of the Fortune 500 companies would be approximately $400 billion. All of the profits from the Fortune 500 companies would be enough to run our government for 40 days. You could take all of the earnings of all the people earning over $250,000 a year, all of the profits of the Fortune 500 and all of the wealth acquired by America’s billionaires, and that would only be enough money to fund our current federal government for eight months. If we can’t even fund an entire year of spending, how do we reduce our deficit? If this doesn’t make you uneasy about our nation’s current fiscal crisis, it should.
Why do I bring up all these taxes and the deficit? Because you need to take personal financial responsibility for your financial well-being and that of your family. You can’t rely on friends, family and the government to fill the financial gaps; but with proper planning, you can minimize the risks to yourself and your family.
Reach out to your agent or advisor today to start the process.
Friday, August 10th, 2012 | | |
As a parent, you take your role as your children’s first educator seriously. You’ve taught them to brush their teeth, do their homework and go to bed on time—albeit with varying degrees of success on any given day. But what have you taught them about money?
You might think that preteens and adolescents are too young to learn about dollars and cents, that there is plenty of time for them to become acquainted with fiscal responsibility. But the following statistics on the Washington State Department of Financial Institutions website might change your mind:
- People in the 18 to 24 age bracket spend nearly 30% of their monthly income just on debt repayment. (10% of net income is a recommended amount for debt obligation).
- American children, teens and young adults (ages 8-21) earned about $211 billion in 2003 and spent at a rate of approximately $172 billion per year.
- The average 21-year-old in the U.S. will spend more than $2.2 million in his or her lifetime.
They get it, they spend it—and in far too many cases, the amount they spend exceed the amount they have. According to 2005 figures from Jump$tart Coalition, 45% of college students are in credit card debt, with the average being more than $3,000. The Richmond Credit Abuse Resistant Education (CARE) Program noted that the number of 18- to 24-year-olds declaring bankruptcy increased 96% in 10 years.
Where can this future debt-ridden generation learn better money management and financial planning habits? Possibly in school, although while 38 states have personal finance standards or guidelines, only seven require students to take a personal finance course to graduate, according to information from the National Council on Economic Education.
The money ball is back in the parent’s court, but help is available from your insurance advisor, financial planner and organizations such as LIFE. Here are some suggestions to start the money conversation with your children.
Share your sessions. Make them part of your planning session with your insurance professional or financial advisor. A discussion about the various types of insurance and the role they play is critical, especially since statistics have shown that while 70% of adult Americans say they personally need more life insurance, only 36% own a policy they purchased on their own, according to the LIMRA and LIFE Insurance Barometer Study 2011, and LIMRA’s Person-Level Trends in U.S. Life Insurance Ownership study 2011.
Make it a game. LIFE’s Next Generation Financial Literacy Program (with materials available as a DVD and online), were originally intended as tool for educators to use within the classroom to cover the basics of risk management and financial planning, as well as life, health and disability insurance. But parents and children can learn quite a lot from NextGen3, by taking the quiz, playing the interactive Risk game or getting a history lesson on the concept of “risk pooling.”
Teach by example. To really have an impact, you need to “walk the talk.” Engage your children in budget planning and investing discussions, or have them participate in researching the best options for saving money for a family vacation or college funds. When they see the long-term ramifications of every choice, they will be better able to make wise decisions when they are in charge of the piggybank.
It’s never too early to educate your children about the realities of life. And like most parenting experiences, you may end up learning more than a little yourself!
Friday, July 6th, 2012 | | |
A quick glance at how women have been portrayed on TV in the past 50 years reveals a significant change in their roles and identities. From Barbara Billingsley, the pearl-and-white-gloved mother on “Leave It to Beaver” to Linda Lavin and Mary Tyler Moore (just to name two) portraying career women to today’s crop of actresses playing everything from an ex-IRA operative (Gabrielle Anwar in “Burn Notice”) to a police detective and medical examiner duo (Angie Harmon and Sasha Alexander in “Rizzoli & Isles”), the message is that women have stepped far beyond their homemaker roles.
And in many cases, due to choice or circumstances, they are making their life journey without a partner—about 51%, according to some studies. There are almost 15 million households led by single women in the United States, and close to three-fifths have children under 18. Independent? Yes. But with that independence comes an increased need to plan for life events that are challenging enough with a partner but can be overwhelming when faced alone.
Life and Long-Term Care Insurance
While life insurance is critical for single mothers who might otherwise leave their children without financial resources, even those women without children should consider some type of life insurance—either term or permanent. Depending on the type and benefits, life insurance can replace the financial support that may have been provided to other family members (an aging parent or disabled sibling, for example) or pay off any of her remaining debts after she dies. While the policy cost will be affected by the type and benefit amount, it’s interesting to note that most consumers assume the price of life insurance to be far higher than reality.
Long-term care is an expensive proposition. According to the Genworth 2012 Cost of Care Survey, rates start at $18/hour for in-home basic homemaker services and increase to $3,300/month for assisted living to more than double that for a private room in a nursing home. And it’s not just the elderly (those 75 and older) that may need it. According to the American Association for Long-Term Care Insurance, 37% of those who require some form of long-term care are 64 or younger.
Even if family members are available to help provide care, the cost can still be significant. According to the Genworth’s “Beyond Dollars” report, the average that recipients pay for out-of-pocket expenses (not including the cost of facility care) can reach $14,000/year, while family members spend another $8,000/year. Long-term care insurance can help defray the expense, and, for those single women without family members to call on, it can help relieve the worries of what will happen if they are no longer able to care for themselves due to accident or illness.
The statistics are sobering: The average age of disabled-worker beneficiaries was 53 in 2010, and almost a quarter of people would have financial trouble immediately if they couldn’t work and earn a paycheck, while half would have trouble in just a month, according to a LIFE Foundation survey.
For women on their own, the impact of even a short-term disability could be devastating. Unable to rely on their partner to provide an income, they could find their savings depleted and their future (and that of any dependents who rely on them) in jeopardy. Given that the majority of accidents are not work-related, women need to take proactive measures such as purchasing disability insurance to protect themselves, their assets and their future.
Retirement used to be called “the golden years” but with the increase in health-care costs and the decrease in value of most investments, the “gold” is more than a little tarnished, and women especially are worried about what the future might hold. According to the 2010 Wells Fargo Retirement Fitness Survey, about 40% of women have less access to defined benefit plans, while 58% worry that they haven’t saved enough for their retirement. As for relying on Social Security, 30% of women plan to wait until age 66 or older to apply. Compared with their male counterparts, they have far less confidence in the stock market, or, for that matter, their own ability to save enough to make the years ahead appear anything less than challenging.
For single women, it can be even more difficult, since they may only have their own pension, retirement funds or Social Security check to depend upon. Taking a proactive approach by meeting with a retirement planning specialist is a critical first step to planning for the years ahead.
Woman have proven themselves capable of handling a variety of life roles and responsibilities—from raising children to succeeding in the workplace. Evaluating their needs and putting key strategies in place is one more empowering step that all women—married or single, with or without dependents—need to take to secure their future.
Thursday, April 5th, 2012 | | |
Several years ago, like so many other women, I went through a divorce.
It’s a difficult time for all involved, but as a financial professional, the experience reminded me how important it is for women to ask questions and be involved in large and small financial decisions that affect the family now and into the future.
Most people don’t enter into marriage thinking of divorce any more than thinking they will become a widow. Still, women in this country must clear many hurdles to have a healthy financial future. They need to pay attention to personal finances—single, married or otherwise—because one way or another there is some likelihood they will be doing it alone.
The reality is that women live longer than men. They need to extend their retirement income far longer and the probability of needing additional dollars for long-term care assistance is a distinct probability. In 2010, some 40% of women over 65 were widows, according to the U.S. Department of Health and Human Services’ 2011 report on older Americans. Almost half of women 75 or older lived alone, and the older women’s median income is now a paltry $15,000, according to that same report.
Is that our future? That is not what I want for my daughters (Meredith on the left and Morgan on the right) or anyone else’s daughters.
So in addition to asking questions and taking notice, in my opinion, here is some food for thought for the next generation of women who are married or just thinking about it.
Bank accounts: Sharing joint accounts may help to dissolve any mysteries about where and how family income is spent. Many couples decide to split expenses evenly, but seriously consider having the higher wage earner pay the larger portion of the bills. And do consider carving out your own savings account in addition to any joint responsibilities you may have.
Prior debt: Will each spouse be responsible for the debt the other incurred before the marriage, and if so, to what extent? Keeping the indebted spouse’s prior debt separate will help ensure the other spouse’s property remains out of reach of creditors.
Retirement: Saving enough for retirement should be a major financial objective for women. Women often spend more time out of the workforce than men as a result of caregiving responsibilities, and because of this, they are less likely to have pensions and full Social Security benefits. According to the U.S. Department of Labor, women average 12 years out of the paid workforce, primarily for caregiving duties. When they do work, women, on average, earn 80 cents for every dollar earned by their male counterparts.
Insurance: Disability insurance can provide financial protection in the event you are unable to work because of an accident or an illness. The benefits from these policies can help you pay your bills. Similarly, life insurance can help provide a measure of financial security upon death by providing funds for children to attend college or keep up with a mortgage payment.
Don’t be stuck in the dark about your financial future. Make good choices now.
Friday, March 23rd, 2012 | | |
Did you know that for women 65 and older Social Security represents two-thirds of their income? Without Social Security, an estimated 58% of widows (age 65+) would live in poverty, according to a 2010 U.S. Congress Joint Economic Committee report. With inflation and other economic pressures, women who are relying on Social Security income in retirement may be faced at some point with choosing between food or medicine, rent or car repairs, or a myriad of other financial dilemmas.
Did these women envision such a meager future? Probably not. More than a few probably wish they had understood money matters better or actively invested for retirement.
You have the power to change your future by being aware what kinds of situations influence your ability to save for your retirement and by taking proactive steps now to prevent problems in the future.
Know that these factors will influence your ability to earn, save and not outlive your money in retirement:
Women spend on average 12 years out of the workforce. Often this is due to women taking on caregiving responsibilities—for children or adult family members. That means they have 12 fewer years than men during which they are putting money into their retirement funds.
Women live longer. On average, they live five years longer than men: 80.5 years versus 75.5 for men, according to the Centers for Disease Control and Prevention. But they may actually spend a decade or more on their own, due to divorce or widowhood.
Women face an earning gap. Women earn just $0.78 for every dollar that men do, according to the Government Accounting Office. And the gap is even larger for women of color.
Here are some areas where you can be proactive about ensuring a financially successful retirement:
Make sure you are getting paid what you are worth at work. Some women are reluctant to negotiate a better salary. Don’t worry that it will seem too aggressive; men do it all the time. It takes confidence and probably a little research to affirm your professional worth with your boss, but you need to do it.
Don’t equate a rich spouse with a retirement plan. Remember, only fate knows where that spouse and that money might end up someday.
Make sure you have a plan in place. The smartest move is to sit down with an advisor who can walk you through what you may need now, such as life insurance (for both you and your spouse, if you’re married), disability insurance and a solid investment strategy for your retirement. As you reach your middle years, long-term care insurance becomes an important consideration so you don’t destroy your retirement nest egg, should you or your spouse need care.
Preparing for a sound retirement requires focus, patience and dedication. But most importantly, it requires you to take that first step. I urge you to do it now.
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